Health insurance mandate nullified

Posted Mon, December 13th, 2010 12:31 pm by Lyle Denniston

A federal judge in Richmond, Va., ruled Monday that Congress had no authority under the Constitution to require that nearly every American obtain health insurance by the year 2014 — a crucial part of the health care package promoted by President Obama. U.S. District Judge Henry E. Hudson, in a 42-page ruling, declared that “an individual’s personal decision to purchase — or decline to purchase — health insurance from a private provider is beyond the historical reach of the Commerce Clause.” The mandate, the judge added, also cannot be upheld under the General Welfare Clause. This was the first federal court ruling against that requirement, after four other District Court judges had turned aside similar challenges — sometimes for procedural reasons.

While nullifying the insurance mandate, the judge rejected the state of Virginia’s plea to strike down the entire new health care law. The law, the judge said, covers many other things, even extraneous to health care. In addition, the judge turned down the state’s plea for a specific order barring the government from enforcing the insurance mandate, saying a declaration that it is invalid would be sufficient, especially since that clause would not take effect until 2014. The order to implement the decision is here.

Judge Hudson also noted what virtually every observer expects: that is, that the constitutional dispute over the package will ultimately be decided in the higher courts, ultimately the Supreme Court. “The final word will undoubtedly reside with a higher court,” the judge wrote.

The finding that Congress did not have authority under the Commerce Clause to pass the mandate was the most significant part of the decision. “At its core,” the judge wrote, “this dispute is not simply about regulating the business of insurance — or crafting a scheme of universal health insurance coverage — it’s about an individual’s right to choose to participate.”

Judge Hudson also rejected two other claims by federal officials of congressional authority to pass the measure: first, that it was valid under the Constitution’s Necessary and Proper Clause, and, second, that it involved a form of taxation (the penalty for failing to obtain insurance) and thus could be upheld under the General Welfare Clause.

The grant of power to Congress to pass laws “necessary and proper” to carrying out its constitutional duties, the judge said, is not without its limitations. That Clause provides no authority for Congress to act unless it is seeking to carry out one of its enumerated powers — that is, one of the powers expressly assigned to Congress by the Constitution, the judge noted. Since there was no authority to pass the measure under the Commerce Clause, the Necessary and Proper Clause cannot supply it, according to the ruling.

Treating the penalty that could be assessed for those who failure to get insurance by 2014 as if it were a tax penalty, enforced under the federal tax code, government officials had argued that Congress could use a tax measure as a way to promote the General Welfare. But Judge Hudson refused to accept that the penalty was, in fact, a form of tax. Congress did not intend the insurance mandate to be a revenue-raising measure, but rather a regulatory law, and the penalty is part of the regulatory scheme, the judge found. “The use of the term ‘tax’ appears to be a tactic to achieve enlarged regulatory license,” the judge wrote.

At one point, the judge noted, Congress in fact had labeled the assessment for failure to get insurance a “tax,” but it later dropped that in favor of “penalty,” and did so as “a conscious and deliberate act.” Hudson also concluded that the fact that the assessment would ultimately raise $4 billion in revenue each year did not make it a “tax,” as such. And, he wrote, the decision by Congress to make the penalty a part of the tax code may have been only because “Congress simply docked the provision in a convenient harbor.”

If the penalty cannot be justified as a tax under the General Welfare Clause, it would have to be tied to another enumerated power of Congress, and the lawmakers sought to enact it under the Commerce Clause, the judge noted, and he already had rejected that basis. “The absence of a constitutionally viable exercise of this enumerated power is fatal to the accompanying sanction for noncompliance,” the judge concluded.

In the main part of the opinion dealing with the government’s defense of the insurance mandate under the Commerce Clause, Judge Hudson rejected the basic logic that government officials and lawmakers had used to justify the command to get insurance by 2014. The argument had been that the mandate was the “linchpin” of the entire law, because everyone who might ever need health care should ultimately be helping to pay for it, rather than becoming a charity case, and without everyone paying their share, the goal of universal health care could not be achieved, and neither could the elimination of insurance company limits on benefits.

But tying that all together, Judge Hudson said, does not make the decision to obtain health insurance, or not, into an economic activity that Congress had the authority to regulate. What Congress sought to do, according to the ruling, was “to compel an individual to involuntarily enter the stream of commerce by purchasing a commodity in the private market.” The Supreme Court, and no other federal appeals court, has ever extended the Commerce Clause to that activity.

And, the judge added, that activity is actually not activity; the decision not to buy or otherwise obtain health insurance is, in fact, inactivity. Congress’s regulatory powers, the judge said, “are triggered by some type of self-initiated action.” Refusing to get insurance does not fit into that concept, the opinion concluded.

In refusing to strike down the entire law, even though the “linchpin” mandate was crucial to it, Judge Hudson said that it “would be virtually impossible within the present record to determine whether Congress would have passed this bill” without the mandate, since Congress passed the 2,700-page bill in haste before a final vote last Christmas Eve. So, the judge said, he would follow the established rule to sever the invalid part of the law, and leave the remainder intact.

And, in refusing Virgina’s specific request, if the mandate failed, to block its implementation, the judge said “there are no compelling exigencies in this case.” The mandate does not take effect until 2013 at the earliest, and, the judge added, federal trial judges are generally reluctant to impose a hard-and-fast, do-not-enforce order on federal officials who have been told that a law is invalid. The officials can be expected to follow the law, even without an injunction, the judge concluded.

Upcoming Oral Arguments

3/31Kimble v. Marvel Enterprises, Inc. Whether the Court should overrule Brulotte v. Thys Co., which held that “a patentee’s use of a royalty agreement that projects beyond the expiration date of the patent is unlawful per se”.

4/20Johnson v. United States Whether possession of a short-barreled shotgun is a violent felony, leading to a longer prison term as a career criminal.

4/21McFadden v. United States A federal prosecutor’s duty to prove that a suspect knew that a substance was an illegal substitute for a banned drug.

4/22Horne v. Department of Agriculture The federal government’s duty to pay raisin growers for an order requiring removal of part of a year’s crop from the market to stabilize prices.

On Monday afternoon Justices Anthony Kennedy and Stephen Breyer testified before the House Appropriations Committee. The purpose of the hearing was to discuss the Court’s budget for the next fiscal year and the federal judiciary, but the legislators also took full advantage of the occasion to touch on other topics as well.